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Introduction to Economics (ECO 101) Sample Quiz 1

Note: This is an individual assignment. Please do not share your answers with anyone. If
your answers are similar with another student, you will be penalized (lose marks).

Question 1

We want to build a model to study the number of coronavirus cases detected per day. Identify
two important variables we should include in our model. How can we study the relationship
between the variables in our model?

Answer

Two variables that we can include in the model are:

1) Number of tests per day

2) Population density (number of people living in a given area)

To study and identify the correct relationship between the variables we need to assume ceteris
paribus. For example, if we want to study how the number of tests per day affects the number of
coronavirus cases detected per day, we need to assume that other factors, such as the population
density, are constant. If we assume ceteris paribus, then the coronavirus cases per day are likely
to increase as we increase the number of tests per day. The opposite is true as well. This positive
relationship can be illustrated using the following upward sloping graph:

Coronavirus cases per day

800

500

Number of tests
1000 2000

The above graph informs us that as the number of tests increase from 1000 to 2000 per day, the
coronavirus cases detected per day increases from 500 to 800.

Similarly, when we want to study how the population density affects the number of coronavirus
cases detected per day, we need to assume that other factors, such as number of tests, are
constant. If we assume ceteris paribus, then we may conclude: as the population density
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increases the number of cases detected per day will increase. Again, this positive relation can be
modeled using an upward sloping graph similar to the one above.

Question 2

Use the cost-benefit model to discuss how incentives and opportunity costs affect the decision-
making of individuals. You should use your own example(s) to explain.

Answer

If I attend a class at NSU, then I receive 0.2 marks. However, if the attendance marks per class is
increased from 0.2 to 0.5 marks per class, then I will be more motivated to come to class. The
added incentive will increase the benefit of coming to class. Therefore, the benefit of coming to
class will become much greater than the cost of coming to class, assuming ceteris paribus.
Hence, I am more likely to decide to come to class. Thus incentives can affect decision-making
and behavior.

The opportunity cost of coming to class can be club activity at NSU. If there is a very important
business competition where I can obtain a certificate for participation, then the opportunity cost
of coming to class will be very high. This is because if I come to class, I will be sacrificing the
learning experience and the certificate for participation. This increase in opportunity cost is
likely to make the cost of coming to class much greater than the benefit of coming to class,
assuming ceteris paribus. Hence, I am more likely to decide to miss the class. Thus a change in
opportunity cost can affect human behavior.

Question 3

Assume that Bangladesh has found a vaccine for coronavirus. Discuss how Bangladesh will face
the problem of scarcity when distributing the vaccine among the population. Discuss in detail the
effects of scarcity in this case.

Answer

Due to the very large population of Bangladesh, the number of people who need and want the
vaccine is likely to be much greater than the number of vaccines available. Hence, we are likely
to face scarcity of vaccines.

Bangladesh will face the following effects of scarcity:

1) Choice: The government of Bangladesh will have to choose which individuals will get the
vaccines first, since it will not be possible to give the vaccines to everyone.

2) Rationing Device: The government of Bangladesh might give the vaccines to children first. In
this case, age can be a rationing device. For example, individuals above 40 will receive the
vaccine first.
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3) Competition: There will be competition for the rationing device. For example, people might
try to obtain fake birth certificates to show they are above 40.

End of Sample Quiz 1